There is an old saying that “bad news comes in threes.” Domain name service providers have witnessed two unsettling developments in the past few weeks. The third, still winding its way through the U.S. Congress, could have enormous ramifications. Registries and registrars, in particular, need to speak up or resign themselves to the consequences.

French Court Orders Fines for Parking

As previously reported, in mid-February 2010 a French court fined Sedo €95,000 ($130,000) for parking a trademark infringing domain name. SafeNames reportedly was fined $5,000 in this case for being the domain registrar. The court used terms like “fraud,” “counterfeiting” and “unfair competition” in its ruling. While some in the industry may dismiss this as a case of “beware the (potentially) high costs of doing domain-related business in France,” the judgment could serve as a dangerous legal precedent. Furthermore, it could embolden intellectual property protection advocates seeking any and all means to expand the limits and application of trademark law.

Utah Trying to Expand Internet Regulation

Utah has a documented history of attempting to regulate various Internet-related activities. Most have been struck down in court or repealed in subsequent legislative sessions. Nevertheless, Utah’s latest attempt is called the “Utah E-Commerce Integrity Act” (SB26), and includes provisions to restrict phishing, pharming, and spyware, as well as a state-level version of the U.S. Anti-Cybersquatting Consumer Protection Act (ACPA). The problem with this legislation, unlike the ACPA, is that it intends to hold liable a registrar, registry, or “other domain name authority” who “knowingly assists” a cybersquatter in a local alleged cybersquatting case. Who knows how broadly the courts will interpret this “knowingly” language. Despite advocacy efforts to convince the bill’s sponsor, State Senator Stephen H. Urquhart, to exempt domain name service providers in a manner consistent with federal safe harbor provisions, the Senator refused and no such amendments were made. Consequently, the bill now awaits Governor Gary R. Herbert’s likely signature. Not only will registrars and registries have to inappropriately defend themselves on cybersquatting charges in Utah courts, but the Coalition Against Domain Name Abuse (CADNA, a trademark protection association of almost two dozen global brand holders that promoted Sen. Urquhart’s efforts) intends to lobby Congress for a national provision along the same lines.

FTC Rulemaking Could Be a Game Changer

Potentially the most far reaching initiative is yet to come. The U.S. Congress is currently working on a reauthorization bill for the Federal Trade Commission (FTC) which could expand the agency’s rulemaking authority. An already approved House bill would give the FTC streamlined rulemaking authority over aspects of the business community, thereby allowing the Commission to pursue policy initiatives with little of the typical bureaucratic red tape. For the domain industry, this could mean, for example, that the FTC may decide to issue a new rule requiring US-based registry operators to enforce strict WHOIS accuracy requirements. A registries’ failure to comply with these new rules could lead to fines or civil action. Of course, any cost of enforcing additional WHOIS requirements would be passed through to registrars, and then, of course, on to registrants—ultimately impacting over 115 million registrations worldwide. It’s easy to imagine how such enforcement and monitoring costs could dramatically reshape the domain name industry as we know it.

Fortunately, the die has not been cast. The Senate is considering its own version of the reauthorization language, and this ultimately will have to be reconciled with the House bill. Although many businesses are weighing in against streamlined rulemaking, other powerful interests are lobbying for the authority. Trademark protection advocates most likely are among those proponents. While final legislation probably will be part of a broader package, thereby raising its likelihood of passage, this also increases the prospect of buried clauses and complex legal linkages that demand careful scrutiny and comment.

Now is the time for the registrars and registries to contact Congress and/or get involved with coalitions to work on a coordinated push for an ICANN-related exemption from broadened FTC authority. If domain name service providers just sit around and wait to see what happens, they’ll only have themselves to blame for consequences.